Two proteins, barnase, the extracellular ribonuclease of Bacillus amyloliquefaciens, and barstar, its intracellular inhibitor, are used as a model system for the study of protein folding and protein-protein interactions. Barnase is one of an homologous group of ribonucleases occurring in both prokaryotes and eukaryotes. Recombinant DNA techniques are being applied with three major aims: (1) to facilitate production of wild type and mutant proteins; (2) to examine the structural and control sequences of the genes; and (3) to make specific changes in the sequences to test theories of folding and to probe the barnase-barstar interaction. Both proteins can now be obtained from recombinant genes in E. coli where expression of barstar counters the lethal effect of barnase expression. The structures of both proteins and their complex are known, barnase at 1.5 angstrom resolution. Crystal structures of several barnase-barstar pairs having complementary mutations in the interface, obtained by an in vivo selective technique, have been solved, providing insight into the mechanisms that determine the strength of the bond. Barstar also inhibits a group of RNases from Streptomyces strains. These enzymes are distantly related to barnase with a sequence identity of only 25%. Among the four such enzymes in hand, identities ranges from 40% to 70%. The structures of two, RNases Sa and St, are known from work on nonrecombinant material and a third, RNase Sa2, from our recombinant material. The structure of recombinant RNase Sa in complex with barstar has also been solved. A phage display system has been developed for selection of varieties or homologs of barstar that bind tightly to barnase or its mutants. It is now being used to screen a synthetic barstar library with randomized hydrophobic cores. It might also be useful for cloning barstar homologs from Streptomyces, one of which, for Sa2, has been cloned by conventional methods. An improved system for in vivo selection and testing of barstars has also been developed, using a two plasmid system.